Monday, October 11, 2010

Why Emergency Funds Are Really Dumb

Every finance guru in America has preached that having an emergency fund is the most basic and fundamental part of having a sound financial plan.  Suze Orman has told us that, "Emergency cash is a necessity, not a luxury," while even Michelle Singletary has asserted that you need at least three to six months of living expenses stashed away for a "rainy day."  While I understand the logic behind this, I totally disagree with putting alarming words like "emergency" and "rainy day" in such close proximity to my money.

What's appealing about saving for something bad?  What's motivating about creating an account for when you lose your job or your car clunks out?  What's stimulating about the thought of a major medical condition overtaking your loved one?  It's no wonder 70% of America is living paycheck to paycheck!  Some financial whiz thought fearing us into saving would work and unfortunately it hasn't scared us quite the way they hoped! 

Associating money, something I consider positive, with an emergency, something I consider to be very real, but negative in most instances, just doesn't make sense to me.  That's why I believe emergency funds are really dumb.

I believe that what you verbalize, you visualize and therefore run a greater chance of magnifying in your life.  So, if you're running around asserting that you need an "emergency fund" then what will happen? You'll probably have an emergency!  It's inevitable that your transmission will go out, your favorite cousin who's been dating what's his face for about 10 years will finally decide to get married and have the nerve to have a destination wedding and Christmas will miraculously seem to move up a week and catch you by surprise again this year!

So, what's my answer? . . .

The Opportunity Fund - An Alternative To The Emergency Fund

I believe we should save for opportunities and never emergencies.  Why not focus on the things in life you really would like to magnify and bring forth?  Why not save for a business venture, a dream vacation, a down payment on a home or some other opportunity that would serve your soul?  Why not save for a sunny day; the day you actually have the money to take care of something that both matters to you and adds to your life ?

Will emergencies still arise?  Of course.  But, now you have the opportunity to make what would have once been a crisis a simple inconvenience.  There is nothing pleasant about an emergency, but knowing that if one came up, you could handle it with ease is definitely a blessing.

How To Start Your Personal Opportunity Fund

1.  Ask yourself, "If money were not an obstacle, what would I love the opportunity to be, do or have right now?"  Be clear about what you're saving for. There's no way to get what you want out of life unless you know what you want out of life. Write the vision and make it plain. If you have an opportunity that makes your soul light up every time you think of it, you're bound to get in a rhythm and stick to a plan.

2. Create a savings account separate from your checking account and preferably not linked somehow to your checking account. Make sure you can access it via check writing privileges, but keep the checks out of sight.  Apply the principle, "out of sight, out of mind" and stick to it.  DO NOT have any type of debit or checkcard associated with this account.  If you do, you'll just be cheating yourself out of your own goals.

3. Set incremental goals for the account starting with a minimum of $1000. Obviously it may take a little time to come up with $1000, but it would be an initial goal. Remember, I'm trying to get you to dream big and seize those opportunities you would like to take advantage of in your life. Whatever you are dreaming big for, better cost more than a $1000 or I'm dreaming bigger for you than you are!  After you reach $1000, go for $2500 and then $5000! 

4. Automate your savings.  I want you to make your opportunity fund your top priority. Why?  Because by doing so, you make yourself your top priority.  This is not about funding your dreams if or after everybody else has been paid.  This is about living your life on purpose and being strategic about how you will achieve your goals.  Turn your budget upside down.  You will no longer pay yourself after every one else. You will pay yourself first.

How To Start Saving For Your Opportunity Fund Today

1. If you are doing anything from the article, 5 Reasons Black Women Can't Save, cut those out immediately and you'll definitely have money for your opportunity fund in no time! 

2. Try cleaning out some clutter in your home and having a garage sale physically or even virtually through sites like  If you haven't used something in your home for more than 12 months, chances are you won't.  So, get rid of it and save up for something that will actually serve you.

3. Turn your hobby into a side hustle and start stacking!  I have clients that have hobbies that could really generate income and yet they feel bad for charging people.  You'll get tired of hearing me say this, but sometimes you have to get a little selfish.  This is called self-preservation!  If God blessed you with a talent (aka an ability to produce wealth), stop giving it away and then complaining about being broke!

I'm fully aware that emergencies happen and I do agree that you should have cash that you can access in those times, but I truly want you to have something more than fear driving you to save.  If you take nothing else from this post today, remember, that what you verbalize, you visualize and then magnify in your life. If focusing on the things that bring you joy doesn't motivate you and make you happy, what will?

Until Next Week,

Seek Wisdom, Find Wealth & Be Blessed!


Romina said...

I really appreciate this post. It is both educational and motivational at the same time. I think that we as a people do not realize how powerful the words that we use on a daily basis really affect our lives.'Oppertunity' is a lot more positive than 'emergency', and a word that I would more likely have in my vocabulary. Thank you for the insight as well as a different perspective on how/why to save money. We do need to think before we speak and encourage positivity into our lives. Afterall that is truly how we were created to be-positive!

Anonymous said...

I don't know if I can say that I disagree with you, but I think that there should be both and emergency fund and an opportunity fund. I've been following Dave Ramsey here lately and he suggests that you have an established emergency fund that can only be touched in the case of an emergency, but that also we build into our savings plan a way to finance the opportunities that you suggest. All in all, I love the article, I just don't think that we should put our savings toward a vacation or even a business venture and leave ourselves vulnerable to some unforseen event! Love ya Patrice!

Patrice Cunningham Washington said...

Thanks, Romina. I appreciate you reading and sharing.

Anonymous, of course you're free to disagree! I am open to ALL feedback bacause I know it only allows me to grow.

I think a few people believe I'm saying to just save for something you "like." I've found with my clients though that when I have them save for something they REALLY want or with some specific goal in mind, they're much more consistent. Then, when an emergency does come up, the point is they have some type of savings to turn to.

More than not, folks just don't like to save consistently. Even if I have to tweek the way they look at it a little, in the end I just want them to save and be prepared for it all - the emergencies and opportunities alike!

A. Domestic Engineer said...

me again! (i'm catching up on my blog reading)

i'm all for this idea, i think it's great! my husband and i do not have an "emergency" fund, we simply have a savings account, that is not attached to our checking or the saving accounts for our children, that we pay into monthly. until now the account has bore no title as we didn't deem it necessary.

we live the Word, and the Word says, "Out of the same mouth come praise and cursing. My brothers, this should not be." - James 3:10. i'm not going to speak a curse (so to speak) over my money!

it's money we are saving, period. when we come together and decide we want to save it on something in particular we will. the most important part of not calling our saving "emergency" is that we LOOK FORWARD to paying ourselves first! we often put a little extra on it, b/c we look forward to whatever is going to come from it.

(btw, i've been completely out of blogging but am following you on twitter and your tweets linked to your posts encouraged me to get back at it. Thanks Patrice ;). )

Monica C. said...

WOW....I stumbled upon this blog through "Hello Beautiful" and this post truly hit home for me....I so badly want to go to culinary school to become a Pastry Chef and although I have made the decision in my mind, Im now struggling to figure out how to make this dream a reality. So I truly thank you because you were describing me when you said..."we feel bad charging people....stop giving it away and then complaining about being broke." Okay got it, gone!!! :-)

Patrice Cunningham Washington said...

@Monica C. - I'm glad it helped, dear! Now, go get'em and charge what you're worth, girl!